How to prepare for the future of banking

Viktoria Holubniuk Blog June 1, 2017 | 0

Advances in technology are causing the banking industry to develop faster. Those seeking to take advantage of these trends stand to be immensely successful.

The recent financial crisis in Cyprus, Greece and Turkey has forced banks to adapt and evolve in order to face the challenges ahead. Institutions need to formulate strategies so as to avoid the mistakes of the past and create the business environment of the future.

Following the spate of high-value fines imposed by regulators across the globe, corporate governance has recently turned its focus towards compliance. This, however, will need to change in the coming years. Futurist, trends and innovation expert Jim Carroll recently stated: “Sadly, with all the current focus on compliance, I’ve come to believe that there is a critical lack of future planning on many other corporate boards around the world.” As such, banks will have to shift their concentration to new technologies for the future.

There are certain emerging themes that will affect the business models of banking in the years to come. Increasingly, it appears smaller banks and those operating in emerging markets, such as Turkey and India, are generating more innovative ideas than the more traditional leaders. This has to do with the antiquated systems that most banks have heavily invested in, and are now reluctant to give up.

Service first
Despite such reluctance, customer needs and behaviours will push financial institutions to rethink their strategies. Customers now expect banks to offer more than simple transaction processing, and instead become advice providers. Despite the confidence crisis in institutions, most customers believe banks are secure, and this is a trend that must be taken into consideration. In order to maintain this view, banks need to ensure they do not fall victim to hacking or open themselves up to lawsuits.

A recent Accenture survey of consumers in the US and Canada indicated that most customers do not consider bank branches to be an irrelevant service. Rather, they expect them to be more efficient through in-branch digital tools that create new customer experiences.

As customers become increasingly technologically knowledgeable, they will also expect new innovations that will serve them in a more personalised and efficient manner. Banks are therefore expected to deepen their personal connections with customers using data analysis techniques.

These efforts appear to be very futuristic by current standards. For example, a number of banks are working on predictive analytics of their customers’ accounts, which allow impressive insight into purchasing habits. Using this, not only will banks be able to remind customers of their partner’s birthdays, but they will be able to remind them of the gifts they previously gave as well. At the other end of the spectrum, banks are offering merchants similar insights through market intelligence services.

Contactless payments made using wearable devices are already a trend, and have become something of a status symbol among the younger generation. Biometrics are also likely to play a more important role in the future. From bracelets, stickers and jackets to mobile phones and fitness gadgets, payment providers that have been utilising data from these devices are showing tremendous growth, and are signalling the shape of things to come.

Smaller banks and those operating in emerging markets are generating more innovative ideas than the more traditional leaders.

Keeping consumers on board
To be able to visualise and understand these trends, the opportunities offered and the risks involved, boards must pay more attention to their composition. IT expertise will become even more valuable and, in time, technology committees will become as important as audit committees, if not more so.